Honda calls Formula One quits

Honda president Takeo Fukui on Friday morning announced his company has
pulled out of Formula One.
Honda President and CEO Takeo Fukui poses with Jenson Button, Rubens Barrichello, Ross Brawn, Nick Fry and Honda Racing F1 team ...

Honda president Takeo Fukui on Friday morning announced his company has
pulled out of Formula One.

"Honda Motor Co. has come to the conclusion that we will withdraw
from all Formula One activities, making 2008 the last season for
participation," Fukui told a Tokyo news conference. "The difficult
decision has been made in light of the quickly deteriorating operating
environment facing the global auto industry, brought on by the subprime
problem in the United States, the deepening credit crisis, and the
sudden contraction of the world economies.

"Honda must protect its core business activities and secure the long
term as widespread uncertainties in the economics around the globe
continue to mount.

"We will enter into consultation with associates of Honda Racing F1 and
its engine supplier Honda Racing Development regarding the future of the
two companies. This will include offering the team for sale."

Fukui said the company had no plans to return to F1 "at this stage."

"We have no plans to supply engines to other teams," he told reporters.
"We do not want to be half in and half out of the sport."

Fukui was described by Agence France Presse as emotional. Formula One is
hugely popular in Japan, and the BBC's reporter at the news conference
called Fukui well-known as a racing fan.

Although many carmaker teams in F1 view their participation as good for
sales, Honda has always held the view that racing directly improves its
road car design and engineering. Japan's second-largest carmaker to
Toyota, Honda, like Toyota, has spent freely in F1 recently.

The Japanese carmaker has offered the team for sale with hopes a buyer
can be found by the end of the year, BBC Sport reported. Formula One
reporter David Croft said on BBC Radio 5 Live that he understands the
team have enough money to operate until March. A report by the Reuters
news agency put the time frame closer to a month.

Detail of the Honda Racing RA108.

Photo by xpb.cc.

The first race of the 2009 is scheduled for March 29 in Melbourne,
Australia. Without Honda, nine F1 teams will field 18 cars; 16 is seen
as the number below which F1 cannot continue.

According to the Associated Press, F1 team boss Ross Brawn, who spent
the past year hiring technicians and designing a new car in anticipation
of a major, hope-holding rules change, informed the more than 700
workers at Honda F1's Brackley, England, headquarters Thursday evening
that they would receive three months' severance pay if the team had not
sold by January.

Reuters reported the Japanese team's fate was explained to team
principals at the Formula One Teams' Association meeting under way in
London. The newly created FOTA is finding ways to cut costs of competing
in F1 with the expectation of presenting those ideas to the FIA World
Motor Sport Council next week. The group issued a statement saying they
have agreed upon measures for next season, including substantial cuts in
testing and a low-cost engine for 2011.

A recent Financial Times survey put Honda atop team spending at nearly
$300 million a year.

Honda's withdrawal is the first F1 shoe to drop in the wake of the
global credit crisis. Honda's U.S. sales fell 31.6 percent in November,
the New York Times reported. The report dropped company share price by
5 percent. The company had announced it would slow road-car production
at plants in Japan, Europe and the United States. Reuters reported the
company will have cut production in the United States by 50,000 vehicles
this year.

Although Honda sales figures did not take a hit as big as those of top
U.S. and Japanese carmakers save Ford, which reported a dropoff of 30.5
percent, a strong yen has hurt Japanese business. Bridgestone, F1's sole
tire supplier, revised earnings expectations earlier this year, citing
a strong yen and raw materials costs. Toyota's U.S. sales were off 33.9
percent in November; the company has offered 0 percent financing in a
bid to find buyers. Panasonic, Toyota F1's major sponsor, recently cut
its 2008 net profit projection by 90.3 percent.

Jenson Button, Honda Racing F1 Team, Interim 2009 car.

Photo by xpb.cc.

Formula One insiders fear Honda's decision to quit might prompt thinking
among boardmembers at the sport's other major carmaker participants
-- Toyota, BMW, Mercedes and Renault -- to rethink their companies'
involvement. News that Red Bull drinks billionaire Dieter Mateschitz
last month reacquired the 50 percent of Scuderia Toro Rosso he had sold
to Austrian compatriot Gerhard Berger was greeted with anticipation
that he will attempt to sell his second team. In May this year, Honda
withdrew its backing of Super Aguri, which led to the team ceasing
operation.

FIA president Max Mosley announced in summer that F1 costs were not
sustainable. Attempts to cut spending led to formation of FOTA and
proposals including Mosley's idea to use a single engine. Efforts to
cut costs for small teams were approved in October but wouldn't be seen
to affect a major player like Honda. By selling the F1 team, Honda
emphasizes that Formula One remains prohibitively expensive.

Former F1 driver John Watson complained on BBC 5 Live that a number of
Mosley's rules changes, including the allowance next season of a kinetic
energy recovery system, have been responsible for driving up costs.

The BBC's Croft reported the independent Williams F1 team faces
financial troubles and that Toyota is trimming expenses.

Honda entered F1 in 1963 with American drivers Ronnie Bucknum and
Richie Ginther. Ginther supplied the team's first victory, at Mexico
in 1965. Briton John Surtees won the 1967 Italian Grand Prix. The team
ceased competing after the 1968 season. Honda returned to F1 as an
engine supplier in 1983 and continued in that capacity through 1992,
Honda-powered teams racking up multiple world championships. Through
various entities, the carmaker supplied engines thereafter until buying
into a British American Tobacco-owned team in late 2004. Nearly a year
later, Honda bought the remainder of the BAR team.

Renamed Honda F1, the team finished fourth among constructors in 2006,
eighth in 2007 and ninth in 2008. Englishman Jenson Button delivered the
current effort's only grand prix victory, in Hungary in 2006. Brazilian
Rubens Barrichello delivered 11 of the team's 14 points this season,
aided greatly by a third-place finish at Silverstone in the British
Grand Prix. Out of contract, Barrichello was expected to lose his seat
to Bruno Senna, the nephew of former world driving champion Ayrton
Senna. Under contract Button, whom Honda paid nearly $30 million this
year, could be sidelined for the 2009; Toro Rosso is the only team
without signed drivers.

As teams spend the close season arranging funding, tracks already have
been hit by the economic downturn. Sponsors of the French Grand Prix
backed out, dropping the event from the calendar. The race in Canada was
dropped by Formula One Management over financial issues and local and
provincial governments have not been able to procure funding to continue
the race in Montreal. Officials at the circuit in Hockenheim, Germany,
have announced in the past fortnight that they cannot manage the cost of
continuing a race there, even one that alternates as host with a German
race at the Nurburgring.